Goldman Sachs Group Inc.’s problems with the Securities and Exchange Commission are spilling over into the U.S. midterm elections.
Congressman Mark Kirk, the Republican nominee for an open Senate seat in Illinois, said he will return contributions made by Goldman employees because the SEC is investigating the bank.
Kirk, 50, made the announcement after his Democratic opponent, Illinois Treasurer Alexi Giannoulias, criticized him for taking the donations. The two men are vying for the Senate seat once held by President Barack Obama that will help determine whether Democrats retain control of the chamber.
“We are calling on Congressman Kirk to explain why he voted against Wall Street reform,” said Matt McGrath, a spokesman for Giannoulias. “And we are challenging him to give back his tainted Goldman Sachs campaign contributions.”
Kirk has taken $54,010 from Goldman employees, including $21,600 for his Senate bid, McGrath said.
The congressman said that his campaign is still determining how much Goldman employees donated to him, and that he hasn’t accepted money from the bank’s political action committee.
“I want to set an example on ethics for others to follow,” Kirk said yesterday during a Chicago news conference. “I will err on the side of caution and watch this case unfold.”
A Goldman Sachs spokesman, Lucas Van Praag, declined to comment.
Kirk said he made his decision over the weekend after reading about a civil suit filed by the SEC that targeted Goldman Sachs, alleging it created and sold collateralized debt obligations linked to subprime mortgages in early 2007 without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicles.
“Obviously, this hits a number of other candidates as well,” he said.
Kirk, a five-term congressman from Chicago’s northern suburbs, raised $2.2 million during the first quarter of 2010 and ended the period with more than $3 million in the bank, his campaign said in an earlier statement.
Giannoulias, 34, raised $1.2 million during the first quarter and ended the period with that same amount in the bank, his campaign said last week.
Kirk criticized Giannoulias for not releasing his 2009 tax return, as he has done.
“I knew that I had to finish my taxes on time because I was running for a very high-profile office at a time when transparency is everything,” he said.
Kirk pointed to financial troubles experienced by a community bank run by Giannoulias’s family as one possible reason why his opponent filed for an extension.
“I worry that the coming implosion of his family bank may have tax implications for him and therefore he’s not willing to release his taxes,” Kirk said.
Giannoulias routinely files for an extension on his taxes as he awaits documents from the family business, said Kathleen Strand, a spokeswoman.
“Alexi, as he has for all of the years he has been in public office, will release his tax returns in full as soon as they are filed,” she said, adding they will be released “as soon as possible.”
Broadway Bank in Chicago, whose wealth helped finance Giannoulias’s successful 2006 bid for state treasurer, has been operating since January under a consent agreement with the Federal Deposit Insurance Corp. because of commercial real-estate loan losses. The family must raise at least $75 million by later this month to meet regulatory demands.
Kirk has suggested that Giannoulias exercised bad judgment while working from 2002 through 2006 as a senior loan officer and bank vice president.
Giannoulias has responded by saying the bank was healthy when he left and that just 9 percent of about $240 million in nonperforming assets on the bank’s books originated while he was there.
Lenders are collapsing nationwide amid losses on residential and commercial real estate loans. U.S. banks with problems climbed to the highest level since 1992 in the fourth quarter of 2009, according to FDIC data.
Kirk said he is opposed to legislation to overhaul U.S. financial regulations being pushed by Obama and Democrats in Congress. He said that proposal would “continue the ‘too big to fail rule’” with “even more taxpayer dollars” on the line.
The Senate seat in Illinois is held by Democrat Roland Burris, who isn’t seeking a full term. Republicans are trying to take advantage of ethical problems experienced by Illinois Democrats, including a public corruption trial set to begin June 3 for former Governor Rod Blagojevich, who appointed Burris to complete Obama’s term.
The topic of Kirk’s news conference, held inside a federal courtroom and managed by his congressional staff, was to make the case that Illinois taxpayers and businesses are hurt by what he called a “corruption tax” they face through rigged contracts, kickback scenes and other fraud. He called for added funding for the Federal Bureau of Investigation and federal prosecutors.
A poll by Public Policy Polling released April 6 showed Kirk leading Giannoulias by 37 percent to 33 percent, with 30 percent undecided. The survey of Illinois voters was conducted April 1 to April 5 and has a margin of error of 4 percentage points.